An Open Secret for a Retirement Income

While the trend is changing as people learn more about Social Security, many retirees continue to draw benefits as soon as possible.

If you do so, you could end up leaving a significant amount of money on the table.

But that doesn’t mean everyone should postpone as long as possible.

Let’s look at the issue a little more closely to see how the numbers on Social Security really pan out, and how those numbers could relate to your particular financial situation.

Understanding the math

The Social Security system is essentially set up to reward those who delay: if you were born before 1943 and 1954 and you delay until age 70, your monthly benefit could be up to 32% higher than it would be at the full retirement age of 66. Starting early will reduce your benefit by 25%.

In other words, a $1,000 benefit at age 66 would be a $1,320 benefit at age 70, and starting at 62 would give you $750 in monthly income.

So does that mean you should wait? Let’s compare full retirement age to delaying – starting early can make sense in specific scenarios, but the complexity is beyond the scope of this article. Consider speaking to an advisor who can help you weight the risks and benefits.

Running the numbers

Delaying means a higher monthly payment, but it also means fewer years of benefits. In the example above, 4 fewer years of benefits would translate into $48,000 in “lost” income.

Let’s see how that plays out over the course of a whole retirement.

Life expectancy for the average 65-year old is another 18 to 20 years. For the sake of simplicity, let’s say that translates into 19 years of retirement after reaching the full benefits age of 66. To further simplify the math, we won’t account for inflation, even though Social Security benefits are adjusted for rising cost of living, an important feature.

So, let’s say you retire at age 66 and expect to live until 84. How much better off would you be by delaying your $1,000 benefit until age 70?

If you start taking benefits at full retirement, you’ll have received $228,000 in Social Security income at age 84.

If you wait until age 70, your total income will be $221,760.

From this perspective, it looks like you’re better off just starting benefits at your full retirement age. But what if you don’t live the average amount? What if you, like 1 in 10 retirees, live to age 95? The longer you live, the more income you could get from delaying your benefits:

If you start at age 66, you’d receive $348,000 in income by age 95.


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If you wait until age 70, that amount grows to $380,160 in income.

Is it enough to make a difference? Well, that depends on a number of factors that balance potential short-term and long-term risks.

Thinking through key questions

There are a number of considerations you might need to weigh up when making decisions about Social Security.

A few questions you might want to ask yourself include:

  • What are your planned income sources for retirement? One of the major overlooked risks in retirement planning is longevity – it’s not just about outliving your assets, which is important, but about the possible need for more money than you’d planned for. A higher income from Social Security could help offset that risk.
  • Is Social Security a critical part of early retirement plan? If you are in need of the money sooner, it could change the balance of your decision-making.
  • If you’re married? You might need to approach the issue as a team to maximize your total joint benefit or address your joint financial needs.
  • Are you widowed or divorced? Either situation can have a significant impact on your optimal strategy, depending on your own situation.
  • Do you have a preference for maximizing your guaranteed monthly income? We’ve known retirees who prefer to have as much guaranteed income as possible for the long-haul, even if it means less guaranteed income today.
  • Can your personal resources be expected to support a 30+ year retirement? For those with significant wealth, the issue of Social Security is less pressing. For many retirees, however, longevity risk is critically important.

These aren’t necessarily simple questions to answer, and that’s why we suggest planning Social Security benefits as part of an overall retirement income plan – it’s also why we recommend speaking to an advisor about your own specific situation.

 Married, divorced, or widowed?

 Social Security planning is tough for an individual – add spouses to the mix and it can get even more confusing. Generally, it’s a good idea to approach Social Security benefits planning jointly if you are or were married for 10 years or more.

Spouses can particularly benefit where there are lifetime income disparities.  For example, some couples choose to have the lower-earning spouse draw their own benefits early or register for spousal benefits. This can provide more current income while the higher-earner either delays or suspends payments to help boost long-term income.

However, it’s important to run the numbers on your own situation before developing a strategy. We recommend doing so with a professional advisor or by speaking to the Social Security Administration.

For divorcees who are currently single but who were married for more than 10 years, you may be eligible to receive benefits on your former spouse’s record, even if they have remarried. If you have also remarried, this option is not available.

Please check with your advisor or the Social Security Administration to find out whether you’re entitled to this benefit.

Finally, there are also potential benefits available for widows/widowers and other survivors (children or parents). The benefit amount will depend on a number of factors, making this a situation where it is likely best to speak directly to a Social Security claims representative who can walk you through the options.

In all of these situations, we still suggest asking yourself the same questions we shared above as you wade through the decision-making process.

What about other important decisions?

If you’re thinking about Social Security, you might also be wondering about Medicare. Our free guide to Medicare can help you understand the benefits and potential costs of different plans and courses of action.

Click here to download Medicare Basics today!


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Let Us Help!

We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

Important Disclosures

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.

Securities and advisory services offered through United Planners Financial Services, member FINRA, SIPC. Pasquale Vitucci, CA Insurance Lic. # 0758212, is an Endorsed Agent of Vitucci & Associates Insurance Services CA Insurance Lic. # 0I06319. Vitucci & Associates Insurance Services and United Planners are separate and unrelated companies.
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Further Reading

Early or late retirement help:

Early or late retirement benefits:

Early retirement:

When to receive benefits:

For divorcee:

For widows/widowers: